Productivity Commission’s report on auto industry

The Productivity Commission’s report into Australian car makers has shown once again that the Abbott Government’s open hostility and contempt are at the core of the problem for car manufacturing.

No other government would goad a major employer and contributor to the national economy to leave its shores. Our competitors certainly wouldn’t do this.

Only 13 countries, including Australia, are able to make a car from start to finish, and every single one of them co-invests in their industry. Here, the cost of that support has been $17.40 per capita. This compares with $90 per person in Germany, $264 per person in the US and $334 in Sweden.

Modelling from the University of Adelaide shows that the loss of the industry will lead to a negative annual shock of $29 billion by 2017, or about 2 per cent of GDP.

The fact of the matter is that it will cost the Government much more to see the industry fail than it would to support it.

In fact the Productivity Commission’s report condemns the Government’s own policy.

The Commission recommends that the Automotive Transformation Scheme should not close until after 2017 - after the shutdown of car manufacturing.

The Abbott Government, however, has committed to cutting $500 million from the Automotive Transformation Scheme between 2015 and 2017.

With further cuts in the Budget bringing total cuts to $900 million, those cuts would spell doom not only for the car makers but for the firms in their supply chain.

The Productivity Commission also underestimates the number of jobs that will be lost if the car industry shuts down completely – the real impact is closer to 200,000, not 40,000.

The greatest impact will be in Victoria, where an estimated 100,000 jobs will be lost. And this is in a state where youth unemployment is at a 15-year high.

The south-eastern suburbs of Melbourne will be hardest hit, along with suburbs in the north and north-west where the motor-vehicle producers are located.

Welfare payments and lost tax revenue from an industry shutdown are projected to exceed $20 billion, and it will be more than 10 years before the economy recovers from the underlying hit to GDP.

Gross Regional Product in Adelaide and Melbourne will not recover until 2031 – nearly two decades away.

Implicit in the Productivity Commission’s report is a blunt warning for the Government: reverse cuts to the Automotive Transformation Scheme, drastically step up support for the supply chain manufacturers, and establish a proper skills and training program for automotive workers.

Only then will we have a chance at retaining the industrial capacity Australia needs to ensure a future for the industry, with high-paid, high-skilled jobs.